Practice Area
Private Equity & Venture Capital
Advice to investors and companies on private equity and venture capital investments, from term sheet to closing.
The Practice
A private equity or venture capital transaction is an investment in a company's shares by a fund or investor, usually in exchange for a minority or controlling stake and a set of contractual protections. The Firm advises investors and investee companies, from the first term sheet through to closing.
The Firm advises investors and investee companies on private equity and venture capital transactions, including the drafting, review and negotiation of term sheets and the conduct of legal due diligence on investee companies.
The Firm’s partners have experience of the definitive documentation for such transactions, including shareholders’ agreements and share purchase agreements, and support clients through closing and the fulfilment of conditions precedent and subsequent.
How It Works
How a transaction runs
- Term sheet: sets out valuation, the investment amount and the key protections. Most of it is non-binding, but exclusivity, confidentiality and costs are usually binding.
- Due diligence: a legal review of the company's corporate records, contracts, litigation, licences, employment and compliance, producing a report that feeds into pricing and conditions.
- Definitive agreements: a share subscription or share purchase agreement and a shareholders' agreement covering board seats, information rights, pre-emption, tag-along, drag-along, anti-dilution, exit rights and reserved matters.
- Closing: satisfaction of conditions precedent, payment, allotment of shares, and post-closing filings and conditions subsequent.
Where the investor is outside India, the foreign exchange rules on investment in Indian companies, including pricing, sectoral caps and reporting, shape how the instrument is structured. Rights in a shareholders' agreement about share transfers must also be reflected in the company's articles of association to be fully enforceable against the company.
Scope of Work
Areas of Advice and Representation
- 01Drafting, review and negotiation of term sheets
- 02Legal due diligence on investee companies
- 03Shareholders’ agreements and share subscription agreements
- 04Share purchase agreements
- 05Closing, and conditions precedent and subsequent
- 06Advice to emerging businesses on fundraising documentation
Questions
Questions and Answers
- Is a term sheet legally binding?
- Usually only in part. The commercial terms are generally non-binding, but clauses on exclusivity, confidentiality, costs and governing law are often made binding. The wording decides.
- What does legal due diligence cover?
- The company's incorporation and share capital records, material contracts, intellectual property, employment, regulatory licences, tax filings and any litigation, with the aim of finding risks to price or to mitigate through conditions.
- Do the terms of a shareholders' agreement bind the company?
- A shareholders' agreement binds its parties, but restrictions on the transfer of shares are fully effective against the company and third parties only if they are also included in the articles of association, under the Companies Act, 2013.
- What approvals apply to a foreign investor?
- It depends on the sector and the investment route. Many sectors permit foreign investment without prior approval, subject to pricing rules and filings with the Reserve Bank of India after the share issue.
- What are conditions precedent?
- Steps that must be completed before an investment closes, such as shareholder approvals, regulatory filings or the correction of issues found in due diligence.
